Average Room Occupancy in the Hanoi 5-Star Hotel Market 1997-1999
Finding a Local Partner
Getting Startd; Initial Hurdles
Marketing the Hotel
Staffing the Hotel

A HISTORIC MILESTONE

The Korean hotel industry reached a historic milestone on October 20, 1996, with the opening of the Hanoi DAEWOO Hotel in Vietnam. The city known as the "Pearl of Southeast Asia" played host to 250 guests who arrived from South Korea via charter flight, and 1,500 politicians, public officials, businessmen, scholars, members of the press, diplomats, and representatives of the hotel and tourism industry from Vietnam and around the world. The French journal l'officiel spotlighted the opening ceremony, and special reports ran in other Vietnamese and Korean media. The opening of the Hanoi DAEWOO Hotel is significant because it is the first fully Korean-owned and operated hotel using a Korean brand name, outside of Korea.

DAEWOO Corporation is one of several major conglomerates (chaebol) in South Korea. Founded in 1967 as a textile manufacturer, DAEWOO has since expanded into many different strategic areas including heavy industry, electric  motors, electronics, construction, securities and financial services, and hospitality. 

Approximately two decades ago, DAEWOO was one of the first Korean chaebol to seek an investment opportunity in the hospitality industry. Under the aegis of its construction arm, DAEWOO built a luxury hotel in Seoul to accommodate international travelers, and negotiated a management contract with Hilton International in 1983 to operate the hotel, located near Namdaemun in central Seoul. The DAEWOO-Hilton management contract was the second one in the history of the Korean hotel industry. In 1991, DAEWOO opened a second hotel under the Hilton flag in Kyongju.

Tourism in the Asia-Pacific area has been growing tremendously since the Second World War. After Europe and the Americas, this area is the third largest region in terms of tourism receipts and arrivals worldwide and is growing, (Arroll, 1993) while Europe and the Americas continue to see a decline in worldwide tourism market share. DAEWOO Development Co., Ltd., DAEWOO Corporation's hospitality business unit, has taken advantage of this trend by moving into China and Vietnam in the late 1990s. Some analysts viewed this as a risky move, partially due to a report by Holiday Inn Worldwide rating China and Vietnam as "less politically stable" areas for investment. (Go and Heung, 1995.) Another reason was the decision to use the DAEWOO brand name instead of an already recognized hotel brand, as it had with Hilton in Seoul and Kyongju.

In 1996, DAEWOO opened the Hanoi DAEWOO Hotel in Vietnam and the Yanbin DAEWOO Hotel in China. In 1997, DAEWOO acquired the Guilin Sheraton Hotel in China and renamed it the Guilin DAEWOO Sheraton Hotel. DAEWOO expects to capitalize on its own brand name by applying 20 years of experience in the hotel business in Korea to its operations in China and Vietnam. From there, DAEWOO plans to expand into other international markets. 

Table 1 shows Daewoo's current hotel holdings around the world.

• Hilton International (b,d) Seoul, Korea 1983
• Kyongju Hilton (b) Kyongju, Korea 1991
• Beijing Kempinsi Hotel (c)Beijing , China 1992
• Yanbin DAEWOO Hotel (b) Yanbin, China 1996
• Hanoi DAEWOO Hotel (b) Hanoi, Vietnam 1996
• Hotel Palace (a) Khartoum, Sudan 1996
• Sheraton Sofia (a) Sofia, Bulgaria 1996
• Guilin DAEWOO Sheraton Hotel (a) Guilin, China 1997
• Hotel International Alger (a) Alger, Algeria 1997
• Rabat Hilton (a) Rabat, Morocco 1997

 a: existing hotel purchased whole or in part by DAEWOO
 b: hotel built and operated by DAEWOO
 c: joint venture with Lufthansa
 d: Sold in 1999

Doi moi. American readership will be most familiar with Vietnam through references to the Vietnam war, just as they are probably most familiar with Korea through references to the Korean war. So the question, "Why Vietnam?" is one that must first be answered, given the turbulent past of this subtropical Asian nation, and its Communist government's anti-capitalist policies. In 1986, the Vietnamese government announced a perestroika - like policy known as doi moi (renovation) which encourages  foreign  investment  and  foreign ownership of property, in the interest of promoting free enterprise. South Korea and Vietnam had broken off diplomatic relations in 1974, but with the reestablishment of diplomatic ties in 1992, Korean investment in Vietnam began to accelerate. 

Table 2 shows that as of 1996, Korea is one of the largest foreign investors in Vietnam, following Taiwan, Japan and Hong Kong.
 

The Vietnamese government has encouraged DAEWOO to invest in motors, electronics, cathode-ray tubes (CRTs) and other manufacturing sectors which developing countries traditionally promote for economic development. The  government also recognizes the significance of tourism and the lodging industry in particular in Vietnam, and has encouraged DAEWOO to invest in this area as well.
 

Market opportunity.  Nearby markets  in Southeast Asia are already saturated. Hong Kong, Jakarta, Bangkok, Singapore, and many major Chinese cities have no need for more 5- star or 4-star hotels. In fact, Hong Kong has recently seen several of its hotel properties converted to office space due to overbuilding in the luxury hotel market. Developing countries in the region such as Vietnam, Cambodia, and Myanmar (Burma), on the other hand, still have room for deluxe hotel development (Watkins, 1994).

International tourist arrivals and receipts in Vietnam have been increasing steadily since the implementation of doi moi. (See Table 4.) Much of this increase was in visitors from business and pleasure travelers from foreign countries outside of COMECON (members of the communist trading block), who are presumed to prefer luxury hotels when choosing lodging. Vietnam has a significant dearth of hotels that are capable of providing an international standard of service quality.
 

FINDING A LOCAL PARTNER

The Vietnamese government encourages foreign companies to form joint ventures with local companies when investing in Vietnam. Following the recommendation of the government, DAEWOO formed a joint venture corporation with HANEL (Hanoi Electric). The joint venture, is known as DAEHA Co., Ltd. (an acronym formed from the names of the two partners). In Southeast Asia, people prefer not to do business with others with whom they are not acquainted. They also look for partners with political connections, which are needed to get things done under the Communist regime, and who have an established presence in the community, in order to attract financing (Saunders and Renaghan, 1992). The Vietnamese government recommended HANEL, which already had a partnership arrangement with the cathode-ray manufacturing division of DAEWOO Corp., as the partner for the hotel development.

Lenders and investors expect high rates of return from projects in the Mekong River region. Although they still avoid countries like Myanmar, Cambodia, and Laos, which are characterized by high political risk and lack of investment security, they actively
pursue investment opportunities in Vietnam, where growth is tremendous  (Mattila  1997). Total investment in the Hanoi DAEWOO Hotel amounted to US$165,015,000, comprised of both owner's equity and debt. DAEWOO Corp (US$47,715,000) and DAEHA (US$69,000,000) provided a total of US$ 116,715,000 in debt from their principal financial institutions.  DAEWOO  Corp.  also  provided US$48,300,000  in  owner's  equity.  HANEL contributed US$10,116,000 as a 38-year land lease expenditure.

Profits realized through the 23rd year of the partnership will be divided with 70% going to DAEWOO Corp. and 30% to HANEL. From the 24th through the 38th year, profits will be divided 60/40 in favor of DAEWOO, and thereafter the ratio is 45% to DAEWOO, and 55% for HANEL.

DAEHA and DAEWOO Development Co., Ltd. have agreed to a 20-year management contract, with DAEWOO Development receiving 1.85% of gross revenues and 7% of gross operating profit as its management fee for the first five years of the contract. After that, the percentage of gross operating profit paid to DAEWOO Development will increase by 1% every fifth year.

MARKET OUTLOOK

Vietnam is divided into four major tourist regions: Hanoi-Ha Long-Dien Bien Phu, Hue-Da Nang, Nha Trang-Dalat, and Ho Chi Minh City (Saigon) (Jansen-Verbeke, Go, and Hom 1995). Hanoi, being a regional capital, was chosen as the best candidate for the proposed development. Hanoi is a relic of Vietnam's imperial and colonial past and has rich cultural heritage as well as architectural distinctiveness.

Transportation. 

Hanoi's transportation infrastructure is also sufficiently developed to support travel and tourism. Hanoi has an international airport. Additional transport facilities include the Dien Bien Phu domestic aliport, seaports at Haipong and Quang Ninh, the recently completed Hanoi-Beijing passenger train, and the rail network connecting Hanoi and Ho Chi Minh City in the south. One weakness in local transportation infrastructure, however, is the road system. Vietnam's subtropical climate makes road maintenance particularly difficult. Frequent heavy rains cause continual erosion and therefore the road network in the northern part of Vietnam is in poor condition. For example, travel to and from Dien Bien Phu, a distance of approximately 185 miles, can take up to five days by land.

Competition. Previous hotel construction and development has been concentrated in Vietnam's capital, Ho Chi Minh City. Ho Chi Minh City, like Hong Kong and Singapore, now has a surplus of luxury hotel rooms, and so further development there is impractical. However, in Hanoi, most hotel development has been targeted to the more austere demands  of COMECON  tourists, which as mentioned before, are not up to par with the demands for the new wave of international travelers flocking to Vietnam. This situation makes Hanoi an ideal candidate for upscale hotel development.

The attractiveness of Hanoi for hotel development has not gone entirely unnoticed by other companies, of course, and recent years have seen an increase in the number of 5-star hotels. When the Hanoi DAEWOO Hotel opened in 1996, there was oniy one 5-star competitor, a Sofitel property backed by Accor. As of this writing, however, the number of 5-star hotel rooms in Hanoi has increased to 1,483. Table 5 lists the various 5-star hotel properties in Hanoi, along with their occupancy rates.
 

Financial crisis. In addition to an increased number of competitors, the Asian financial crisis has made Hanoi an increasingly competitive market. Beginning in late 1997, the economic crisis hit many major Asian countries, which are the primary sources for Vietnam's international tourism demand (see Table 6). Foreign visitor arrivals in 1998 were down 12% from 1997, but at the same time around
1,500 new hotel rooms were added to the Hanoi market. This combination of increased supply and sharply decreased demand, has caused the cancellation of three 5-star hotel projects: the Sheraton (Faber Labuan & Renong, Malaysia), the Lien West-Lake Resort (Sonnie Lien, Singapore), and the Great Lake View (Masia Pacific Corp, Thailand).
 

GETTING STARTED: INITIAL HURDLES

Operating in a foreign country presents certain obstacles that are not usually encountered in one's own domestic market. Companies operating outside their own country find that they often have little or no influence over the host state (Dallas 1995). In determining the attractiveness of this development, DAEWOO had to take into consideration the fact that despite doi moi, the Vietnamese government is still communist, and authoritarian, and would no doubt present certain obstacles that DAEWOO had not encountered elsewhere.

Taxes and profit repatriation.  Since it encourages foreign investment, Vietnam was also expected to have an established mechanism for profit repatriation and currency conversion, as well as be fairly lenient with respect to taxes on repatriated profits, and corporate taxes in general. Vietnam actually imposes only a 5% tax on profit repatriation, with no other specific restrictions. Profits may be converted to a hard currency as approved by Vietnam's central bank. The uncertain availability of hard currency in Vietnam has served to delay profit repatriation, but so far no other major problems have arisen. The tax situation is also quite favorable. For the first two years of operation, the hotel pays no corporate tax on profits. During the third and fourth year, the hotel's profits are taxed at half the standard rate (for example, if the stated tax rate is 30% during those two years, the hotel pays at a rate of 15%). After the fourth year, profits are taxed at only one-fifth the stated tax rate (a tax rate of 30% would mean a tax liability for the hotel of only 6%).

Customs duties. Vietnam has also been generous with its levying of customs duties. A hotel operation of this nature, in order to maintain service quality, requires a large amount of supplies to be imported from overseas as they are unavailable in Vietnam. Low tariff rates, ranging from 0% to 5%, were levied  for most operating supplies. Consumables, such as cleaning materials, and artwork used to provide a native atmosphere, such as ceramics and bamboo wares, are all supplied from within Vietnam. A host of general hotel supplies, however, must be imported from overseas. Electronics, bed sheets, duvets, towels, kitchen equipment, tablecloths, service trolleys, uniforms, office supplies, and the like were imported from Korea. Other food and beverage equipment, fitness equipment, palm trees, carpeting, and furniture were all imported from other countries.

Operating licenses and permits. Although the government policies towards the financial aspects of the project were fairly helpful, in other areas, DAEWOO found that local government officials could be rather recalcitrant. Local authorities must sign off on various aspects of the construction, such as elevator or lift approvals, electrical and fire code compliance; they must also provide operating permits such as liquor licenses and health inspection certificates. DAEWOO ran into trouble when applying for a pile-driving license, which is required under Vietnam's building and construction laws.

DAEWOO simultaneously sent invitations to the pile driving ceremony to VIPs in Vietnam and Korea when it submitted an application for the pile-driving license. The ceremony was scheduled for April 26, 1994. However, proverbial red tape, and the foot-dragging of local bureaucrats threatened to delay the ceremony. DAEWOO had made great efforts to receive approval to start driving piles by the specified date, but local officials could offer no assurance as to when the license would be issued. The day before the ceremony was to be held, everything was ready, except for the license. DAEWOO officials were getting desperate as it looked like the ceremony would have to be cancelled and the start of construction delayed. The license was finally received at 4:00 p.m. on the afternoon of April 25th, and the ceremony was held on the 26th, only two days behind schedule.

Lease term. Most companies accustomed to dealing in a capitalist environment expect to be able to purchase the land that their development stands on. Often this is a better investment than a lease for the same property would be. In Vietnam, however, all real estate belongs to the government, and so there is no option to buy. The cost of the land-lease for the Hanoi DAEWOO Hotel was comparatively high, but that can be accounted for by Hanoi's well-developed infrastructure. DAEWOO encountered a problem, though, in that while the Vietnamese government will allow leasing for "stable and long-term use," it usually will not specify the duration of such use. This quite understandably makes the developer quite uneasy. DAEWOO was fortunate to have a specific lease term of 38 years agreed to by the government.

Wages and unionization. The labor-intensive nature of the hospitality industry requires that employment issues be considered when developing a new property. Vietnam's minimum wage at the time was US$45 per month, and so DAEWOO determined that it could set its average wage between US$50 and US$80 per month. The abundance of inexpensive labor is a positive aspect of doing business in Vietnam. The Hanoi DAEWOO Hotel employed some 580 locals, 10 Koreans, and 19 foreigners when it opened. For every silver lining there is a cloud, though, and the cloud in Vietnam is the mandatory establishment of a labor union. By law, hotel employees had to be unionized within 6 months after the start of operations, so a labor union was organized in 1997. Although the existence of the union is mandatory, membership is optional. Even so, about 90% of employees have joined the union, including vice-presidents and directors of hotel operating departments.

DESIGN AND CONSTRUCTION

Each culture has its own unique sense of aesthetics, and Vietnam is no exception. How a hotel "should" look can be a very sensitive issue to local residents, but on the other hand the projected customer mix must be also considered when designing the hotel (Bell 1986). The Hanoi DAEWOO Hotel was designed with business travelers in mind, complete with the facilities necessary to doing business. It also has a tropical/French colonial flair to appeal to both business and pleasure travelers, as well as local residents.
 

Five companies participated in the design of the Hanoi DAEWOO Hotel. RTKL (US) completed the basic construction design. Seoul Architect Ltd. (Korea) handled practical application design. Paul Leese Roberson Freeman Designers Ltd. (Hong Kong) designed the interior spaces. Lighting design was the work of Light Direction Ltd. (Hong Kong). Waters Kinura Motoda, Inc. (US) landscaped the hotel grounds. Construction of the Hanoi DAEWOO Hotel took place between April 1994 and October

Hanoi Daewoo Hotel  360 Kim Ma  Ba Dinh Dist., Hanoi

The construction of the hotel was not completely problem-free,  of course. Supplies  of  local construction materials were inconsistent. Basic materials such as cement, sand, pebble, and bricks were supplied from within Vietnam. These products actually proved to be more difficult to acquire at certain points during the construction than did the reinforcing rods, electric wiring, and finishing materials like tile, wallpaper, and paint which were imported from Korea. Other countries supplied various other materials: marble and curtain walls came from Italy, and other interior finishing materials were imported from Hong Kong. All foreign suppliers were selected on the basis of competitive prices, quality, delivery date, and overall customer confidence regardless of their country of origin.

Despite  efforts to  select the best  local subcontractors, DAEWOO still found the lack of skilled manpower and equipment to be problems during Construction. Vietnamese workmen have little or no experience in using modern finishing materials, and so the Korean foremen had to spend a great deal of time in training and supervision. Language problems and misunderstandings led to arguments and delays.  Needed  construction equipment often had to be imported, increasing construction costs, because it was unavailable for lease in Vietnam. Minor thefts also became a problem  during  the  construction.  Foreign development projects are prime targets for theft in Vietnam's undeveloped economy, and the hotel construction was no exception. Furthermore, thefts increased as construction progressed because of the unwillingness of the local Vietnamese police to prosecute Vietnamese locals for theft.

THE FINISHED PRODUCT

The Hanoi DAEWOO Hotel accommodates international guests visiting Hanoi and has hosted official events such as the Francophone Summit in 1997 and the ASEAN Summit in 1998. The finished hotel stands 18 stories high and serves as a symbol for doi moi - renovation - in a very literal sense. Hanoi, heavily bombed during the Vietnam War, had no buildings higher than 10 stories high at the time the hotel was completed. French Colonial and tropical design influences are evident in the classic balustrades on the balconies and the local tiles used on the first floor and roof of the hotel. The hotel also reminds the guest of an art gallery, as some 1,000 works of art valued at over US $1 million are on display, including an unparalleled collection of original Vietnamese paintings.

The hotel has 411 guestrooms including 33 suites. All rooms are furnished with an international direct dial telephone, central air-conditioning and heating with individual climate controls, a private bath with tub and shower, refrigerator with minibar, a radio/music system, satellite television (CNN, BBC, STAR-TV and NHK Sports), and in-room safe. The hotel has a diverse selection of restaurants featuring Japanese (Edo), Chinese (Silk Road), and French (La Paix) cuisine prepared by some of the world's best chefs. Cafe Promenade, a European buffet restaurant, offers a selection of food from various countries for breakfast, lunch and dinner. The focal point of the hotel is its elegant lobby. Guests enjoy captivating views of the hotel gardens through 40-foot high floor-to-ceiling windows. Sunlight  cascades through the windows, illuminating the original artworks and distinct furnishings that are placed throughout the hotel. At night, guests are enthralled by the panoramic view of Hanoi and Thu Le Lake from the sky lounge, Lake View, on the 18th floor.

Convention and banquet facilities provide the ideal venue for various kinds of functions. With 13 rooms to choose from, seating can be provided for parties ranging in size from 10 to 1,000. A complete selection  of  audio-visual  equipment  and simultaneous translation services in up to six languages is available. The business center, a complete  office-away-from-the-office, provides business travelers with the support they need to get the job done. Spacious, bright, and comfortable, this modern facility boasts private workstations, a library, meeting rooms, presentation facilities, translation services, and complete secretarial support. The latest recreational facilities and equipment are also available, including saunas, Jacuzzis, a sun terrace, gym, aerobics room, massage, outdoor swimming pool, an entertainment club, and a large indoor golf driving range with putting greens.

CULTURAL CONFLICTS

Although both Korea and Vietnam are Asian societies, with common cultural ties in Buddhism and Confucianism, the development of the Hanoi DAEWOO Hotel has proven to be an interesting study in Korean/Vietnamese cultural differences. Generally speaking,  the Vietnamese are not accustomed to accomplishing more than two assignments at the same time. They are very conscious of superstition and must choose an auspicious day for starting and ending work. They also prefer a more relaxed pace than do Koreans. These customs have caused problems for the Korean project managers, especially when work needs to be completed with some urgency.

One episode in particular illustrates the cultural differences encountered. Prior to the grand opening of the hotel in April 1996, several shipping containers of operating supplies had been rushed into Hanoi. The shipment had to undergo inspection by customs officers, of course. Among the shipment were two containers containing 100 beds (mattress and base). The customs officer, counting 200 individual pieces, insisted that there was a discrepancy between the bill of lading and the actual number of beds, and would not sign off on the shipment. Unaccustomed to Western-style beds, the customs officer could not make a distinction between the mattress and base, and remained unconvinced that one bed consists of two parts. Hotel officials assembled a bed as illustrated in the supplier's catalog, to demonstrate how the beds were to be put together, but this still did not convince the customs official. Finally, one of the Korean employees invited the customs officer to his home to see the bed he uses. It took two days to convince him that there were indeed 100 beds, and
to have the shipment approved.

MARKETING THE HOTEL

DAEWOO Corporation is already recognized worldwide as a manufacturer of motors and electronics. However, it is not yet a household word with respect to its lodging operations. The Hanoi DAEWOO Hotel has made focus on market share and building brand recognition its primary marketing activities.

Target markets. Table 7 details the market segments targeted by the Hanoi DAEWOO Hotel. The segment that makes up most of the hotel's occupancy is frequent individual travelers (FITs) and corporate travelers. Following the FITs are pleasure travelers, who make reservations via local and overseas travel agents. The hotel's third major market is government and diplomatic officials. In light of its position as an independent hotel, DAEWOO has sought to increase market penetration by joining reservation service groups such as UTELL International and Leading Hotels of the World. These channels have yet to prove particularly beneficial, however.
 

Room rates /  occupancy / products. The Hanoi DAEWOO Hotel calculates room rates using the $1 per $1,000 approach. With this approach, each $1,000 of building cost requires a corresponding $1 of room rate be charged in order to achieve the desired ROI. However, this strategy is not entirely practical in Hanoi's 5-star hotel market, as most hotels in this category in Hanoi use a low-price strategy. The Hanoi DAEWOO Hotel uses strictly limited discounts in order to maintain service quality; nevertheless, from 1996 to 1999 the average room rate has declined from US$120 to US$80. In order to reverse this trend somewhat, the Hanoi DAEWOO Hotel has developed some new products aimed at increasing the occupancy rate. A personalized service program for Japanese guests, the "DAEWOO Rewards Club"' for business travelers, the "Discover Vietnam/Best Hotels Alliance" program for travel agents and airlines, the "Weekend Delight Package" aimed at Hanoi residents, and the "Long Staying Guest Package" program for extended-stay guests are among these new offerings. Due to these new products and other efforts to increase the occupancy rate, the hotel has enjoyed an average occupancy rate of around 40% in 1997, 1998 and 1999. This may seem low compared with the average occupancy rate of hotels located in well-developed markets, but it is actually the highest among Hanoi 5-star hotels (see Table 5).
 

The Hanoi DAEWOO Hotel has also developed products to increase food and beverage sales. A Vietnamese wedding package and the "Club Q: Vietnamese Lunch Buffet" in the hotel's nightclub have been introduced to appeal to Hanoi's middle class.

Advertising. Advertising efforts include the use of magazines, newspapers, and other periodicals, and television commercials to promote the hotel in overseas markets. Hotel advertisements appear quarterly or biannually in trade magazines such as Hotel and Travel Index International, Hotel & Travel USA, World Hotel Index Japan, and OFMG International. Advertisements appear in overseas magazines relating specifically to business in Vietnam, such as the Vietnam Business Journal, twice each year. CNBC through an arrangement with ABN TV carries ads for the hotel as well. Local advertising efforts include magazines (Heritage), newspapers (Vietnam News and Laodong), billboards along the Thang Long highway, and a kiosk in the airport arrival lounge.

STAFFING THE HOTEL

The lack of 5-star hotels in Hanoi, except for the Sofitel, was a mixed blessing for the Hanoi DAEWOO Hotel. Lack of competition for guests meant a good customer market opportunity, but at the same time the lack of competing hotels also meant a nearly nonexistent pool of experienced employees. The labor market in Hanoi was simply not equipped to supply employees qualified to work in an international 5-star hotel. In particular, high skilled managers are in short supply. The Omni Saigon Hotel experienced similar difficulties in staffing the hotel. Only three months prior to opening, the chain found it necessary to assemble a task force of 30 employees from its Hong Kong and Singapore properties to hire and train staff (Khan 1996).

Recruitment. In Vietnam, official job pools must be inspected for qualified and available employees before a position can be advertised as available. Hotels, however, are allowed to recruit employees from a free labor market (Hobson, Heung and Chon 1994).  The  Hanoi  DAEWOO  Hotel  maintains relationships with educational institutions which provide education in hotel or tourism management, such as Hanoi National, Hanoi Economic, Dong Do, Trade, Hanoi Open University, and Hanoi Tourism College. These relationships enable the hotel to attract educated, service-oriented employees. (Hotel employees are fairly well educated: 19% hold university degrees, 37% a degree from a technical school, and an additional 44% have a high school diploma.) Finding employees to staff skilled and technical positions, such as chefs and engineering, continues to remain a challenge.

Training. Besides relying on local educational institutions to educate its prospective employees, the Hanoi DAEWOO Hotel executes its own training programs.  Approximately 260 Vietnamese employees have traveled to Seoul for training programs at the Seoul Hilton International. Initial training programs began on October 5, 1995, well before the grand opening. Since the pre-opening training programs, there have been 5 additional training sessions, varying in length from 4 months to 1 year. These programs are train-the-trainer programs, and participants are expected to return to Vietnam and pass their knowledge on to coworkers and subordinates. Skills and topics covered include a general orientation, first aid, manners and courtesy, supervisory skills, customer satisfaction, and team building.

Turnover. Although most employees are quite proud to work for the Hanoi DAEWOO Hotel, turnover has increased from 1997 to 1999, in particularly at the director level (see Table 9). Turnover has increased following the entrance of competing hotels into the Hanoi labor market. New entrants to the market have employed the usual tactic of poaching employees from established properties by offering better salaries and benefits. This is not uncommon in situations where trained and service-oriented employees are rare. A similar example of this phenomenon is the Warsaw Marriott, the first 5-star international hotel in Warsaw, Poland, which became a recruiting ground for other hotels (Kotchen 1994).
 

CONCLUSION

Building a large-scale, international 5-star hotel in an untested market is a risky venture. The Hanoi DAEWOO Hotel succeeded in Hanoi due to a combination of entrepreneurial spirit and prior construction experience in Vietnam, and several existing local conditions: market demand, qualified local business partners, and perhaps most important, a supportive financial climate.

Sailing into untested waters with an established brand name is risky enough: DAEWOO gambled that 20 years experience in the hotel industry with Hilton would provide the necessary expertise to guarantee success in Hanoi. It remains to be seen whether the decision to fly the new flag should be considered a risk, or an opportunity to grow, especially in what has become a fiercely competitive market for both guest and employees.

To be sure, hurdles remain. DAEWOO must continue its marketing efforts to establish brand recognition and increase market share. Continue efforts must be made to educate employees in order to reduce culture clashes. A major ongoing challenge will be in human resources: recruitment and retention of skilled employees, as well as ongoing training in order to ensure a consistently high level of service quality. Given its current position as leader in the Hanoi market, and the valuable lessons learned, we feel that the Hanoi DAEWOO Hotel has been a successful first attempt at expanding into other markets as a truly international hotel chain.

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